Secretary of State Colin Powell has given a qualified welcome to the reported Libyan offer to compensate the families of those killed in the crash of Pan Am flight 103 in Lockerbie, Scotland. However, he made clear it does not resolve the entire issue of the 1988 terrorist attack, which killed 270 people, most of them Americans.

Mr. Powell says he has not seen an authoritative account of what is said to be a conditional, $2.7 billion Libyan proposal to compensate the Pan Am 103 families.

But in a talk with reporters here after meeting Yemen's Foreign Minister Abu Bakr al-Qirbi, Mr. Powell said it does appear to be at least a positive step in the long-running negotiating process over United Nations and U.S. sanctions against Libya.

"We are waiting to see what the actual Libyan offer is. It is not yet been formally put on the table. And we will examine it when we see all of its elements," he said. "Just reading press accounts of what has been said about the offer, it certainly is a step in the right direction. But I do not think it resolves the entire issue, or resolves all the outstanding issues that have to be dealt with, with respect to Libya and Pan Am 103."

The State Department noted earlier that settling the compensation issue is only one of several requirements for ending U.N. sanctions, and only after all those terms are fulfilled could the United States consider lifting its own array of anti-terrorist measures against the Libyan government.

The compensation deal has been under negotiation for several years between the Libyan government and lawyers for the Pan Am 103 family members.

According to press accounts, the compensation money - $10 million per family - would be paid out in stages, as United Nations and U.S. sanctions are lifted, and the Libyan government is removed from the State Department's list of state supporters of terrorism.

In its latest terrorism report, earlier this month, the State Department again listed Libya among seven countries said to be involved in terror activity. But it credited Libya with taking steps to end links with terrorist factions, and noted its strong condemnation of the September 11 attacks in New York and Washington.

Libya has for several years been seeking an end to the crippling sanctions, and in 1999, it handed over for trial two Libyan intelligence agents accused of planting the bomb that brought the U.S. airliner down in Scotland.

One of the Libyans was subsequently convicted of murder in a special Scottish court in the Netherlands, while the other was acquitted.

Senior U.S. and British diplomats are to hold another in a series of meetings with Libyan officials on the sanctions and related issues late next week in London. The U.S. side in the talks will be headed by Assistant Secretary of State for Near Eastern Affairs, William Burns.